Tag: trade secret protection

A Judge’s Tips for Keeping Trade Secrets “Secret”

Just because information is sufficiently sensitive and valuable that it can qualify as a “trade secret” does not mean that it will qualify unless the owner of the information takes adequate steps to protect its secrecy.

In a recent decision, Judge John J. Tharp, Jr., of the U.S. District Court for the Northern District of Illinois explained that “there are two basic elements to the analysis” of whether information qualifies as a “trade secret”: (1) the information “must have been sufficiently secret to impart economic value because of its relative secrecy” and (2) the owner “must have made reasonable efforts to maintain the secrecy of the information” (internal quotation marks omitted).[1]

According to Judge Tharp, some of those “reasonable efforts” that a company can take to maintain the secrecy of its information include:

  • using non-disclosure and confidentiality agreements with employees;
  • enacting a policy regarding the confidentiality of business information that is more detailed than a mere “vague, generalized admonition about not discussing [company] business outside of work”;
  • training “employees as to their obligation to keep certain categories of information confidential”;
  • asking departing employees whether they possess any confidential company information, and, if they do, instructing them to return or delete it;
  • adequately training IT personnel about data security practices;
  • restricting access to sensitive information on a need-to-know basis; and
  • as appropriate, labelling documents “proprietary” or “confidential.”

As Judge Tharp made clear, companies that fail to institute reasonable measures to protect sensitive information do so at their own peril.

[1] Abrasic 90 Inc. v. Weldcote Metals, Inc., No. 1:18-cv-05376 (N.D. Ill. Mar. 3, 2019) at 11.

 

©2019 Epstein Becker & Green, P.C. All rights reserved.
This article was written by Peter A. Steinmeyer and Erica McKinney from  Epstein Becker & Green, P.C.
For more on employer/employee relations see the National Law Review Labor & Employment page.

Trade Secret Misappropriation: When An Insider Takes Your Trade Secrets With Them

Raymond Law Group LLC‘s Stephen G. Troiano recently had an article, Trade Secret Misappropriation: When An Insider Takes Your Trade Secrets With Them, featured in The National Law Review:

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While companies are often focused on outsider risks such as breach of their systems through a stolen laptop or hacking, often the biggest risk is from insiders themselves. Such problems of access management with existing employees, independent contractors and other persons are as much a threat to proprietary information as threats from outside sources.

In any industry dominated by two main players there will be intense competition for an advantage. Advanced Micro Devices and Nvida dominate the graphics card market. They put out competing models of graphics cards at similar price points. When played by the rules, such competition is beneficial for both the industry and consumers.

AMD has sued four former employees for allegedly taking “sensitive” documents when they left to work for Nvidia. In its complaint, filed in the 1st Circuit District Court of Massachusetts, AMD claims this is “an extraordinary case of trade secret transfer/misappropriation and strategic employee solicitation.” Allegedly, forensically recovered data show that when the AMD employees left in July of 2012 they transferred thousands of files to external hard drives that they then took with them. Advanced Micro Devices, Inc. v. Feldstein et al, No. 4:2013cv40007 (1st Cir. 2013).

On January 14, 2013 the District Court of Massachusetts granted AMD’s ex-parte temporary restraining order finding AMD would suffer immediate and irreparable injury if the Court did not issue the TRO. The TRO required the AMD employees to immediately provide their computers and storage devices for forensic evaluation and to refrain from using or disclosing any AMD confidential information.

The employees did not have a non-compete contract. Instead the complaint is centered on an allegation of misappropriation of trade secrets. While both AMD and Nvidia are extremely competitive in the consumer discrete gpu market involving PC gaming enthusiasts, there are rumors that AMD managed to secure their hardware to be placed in both forthcoming next-generation consoles, Sony PlayStation 4 and Microsoft Xbox 720. AMD’s TRO and ultimate goal of the suit may therefore be to preclude any of their proprietary technology from being used by its former employees to assist Nvidia in the future.

The law does protect companies and individuals such as AMD from having their trade secrets misappropriated. The AMD case has only recently been filed and therefore it is unclear what the response from the employees will be. What is clear is how fast AMD was able to move to deal with such a potential insider threat. Companies need to be aware of who has access to what data and for how long. Therefore, in the event of a breach, whether internal or external, companies can move quickly to isolate and identify the breach and take steps such as litigation to ensure their proprietary information is protected.

© 2013 by Raymond Law Group LLC

The Inside Job: Can Employees Walk Out The Door With Your Company's IP?

Recently in The National Law Review was an article by Katie L. Clark, Rohan Massey, and Hiroshi Sheraton of McDermott Will & Emery regarding IP Security:

With the economic downturn forcing redundancies, most employers are aware that the Q1 period brings an increase in employee movement. But have employers considered how much value could be walking out the door when an employee leaves? In today’s “knowledge economy”, businesses increasingly understand the value of intangible assets in the form of information.  Yet few businesses give thought to how and where those assets reside, or consider how much can be lost or passed to a competitor when employees move on.

The ease with which knowledge can be taken by employees has increased exponentially in recent times.  USB drives are now large enough to store literally millions of documents and cloud computing can provide limitless secure storage.  The increase in remote working also allows employees to download your documents and information in the privacy of their own homes.

There is also a growing international market for transferable knowledge, making the temptation even greater for employees to maximise their value to their new employer.  Emerging economies, with different laws, regulations, and cultural values, provide a ready market into which intellectual capital can be dispersed.

This issue affects every industry.  A number of high profile cases in the United States and China have seen former employees jailed for theft of trade secrets relating to consumer electronics and financial trading software, but every business has a wealth of internal knowledge that is used to give it a competitive advantage over its rivals.  Business plans, presentations, strategies, customer lists, market positioning, and protocols and procedures are all valuable assets that can find their way to new employers.

Most worryingly, this movement of information is not confined to “rogue” employees.  Many salespeople will claim that their address books of contacts belong to them, not to their employer.  Each type and level of employee and each type of business is likely to have a different understanding of what belongs to the company.  In addition, international cultural differences play an enormous role in determining where employees perceive the boundary to be between legitimate and illicit use of information.

So, how do you distinguish between what an employee is free to take away and what should remain with the business before it’s too late?  What procedures should be in place to maximise the intangible value retained by the business when employees move?  To what extent do data protection and privacy laws permit monitoring of employees’ activities?  What procedures are available when employees are suspected of taking valuable information and/or passing it to competitors?

In 2012, McDermott will be running a number of IP- and employment-focused seminars to provide an overview of how intellectual property and employment laws can help your company to protect it, and the policies and procedures that can be used to mitigate value walking out the door.

© 2012 McDermott Will & Emery

Trade Secrets – Protecting Your Confidential Information

As seen recently in The National Law Review an article by Harvey Koning of Varnum LLP regarding protecting your confidential information:

Varnum LLP

 

Some of the most valuable intellectual property in the world is not protected by a patent or trademark. A famous example is the formula for Coca-Cola – it is protected as a trade secret. A more recently created trade secret is the algorithm Google uses to rank websites. Google protects it by keeping it secret. But trade secrets are not limited to blockbuster inventions by huge companies – almost every business has trade secrets worth protecting. What if your biggest competitor hired away one of your key employees? What confidential information would you not want this person to take? This article describes how to identify and protect your valuable trade secrets.

What is a “trade secret”?

“Trade secrets” can include customer lists, databases, pricing information, cost and profit margin information, computer programs, the content of contracts and much other valuable information. Basically, anything that gives you a competitive advantage over your competition can be a trade secret. A trade secret is something not generally known or easily discoverable by people outside your business.

If your information has “trade secret” status, then you can take legal action to prevent someone (such as a former employee) using the misappropriated information and, in some circumstances, you can seek a monetary recovery from someone who has misused your trade secrets. Trade secrets offer important advantages. They do not require any patent or trademark filings, fees or government approvals. Trade secret protection does not expire after a fixed amount of time.

How do you obtain trade secret protection?

To get trade secret protection, you must make a reasonable effort to protect your confidential information. A good place to start is by thinking about and listing what information you have that is not known to the public or easily discoverable that you would like to protect. After you have identified your confidential information, here are some of the steps you can take:

  • label the information “confidential” or “proprietary”
  • have employees sign a confidentiality agreement
  • limit access to those who need to know
  • keep the information in a secure location
  • remind departing employees of their obligation not to disclose confidential information

The particulars of your situation help determine the appropriate steps to take. A good place to start is a company policy about protecting confidential information.

Making an effort to protect your confidential information is a wise investment in preventing your important information from falling into the wrong hands (anyone other than you!).

© 2012 Varnum LLP